62
ESTTBRNAL REVENUE CODE OF 1954
the taxable year in which the bond is called shall include an amount equal to the excess of the amount of the adjusted basis (for determining loss on sale or exchange) of such bond as of the beginning of the taxable year over the amount received on redemption of the bond or (if greater) the amount payable on maturity. (3) M E T H O D OF DETERMINATION.—The determinations required
under paragraphs (1) and (2) shall be made— (A) in accordance with the method of amortizing bond premium regularly employed by the holder of the bond, if such method is reasonable; (B) in all other cases, in accordance with regulations prescribing reasonable methods of amortizing bond premium prescribed by the Secretary or his delegate. (c) ELECTION AS TO TAXABLE AND PARTIALLY TAXABLE B O N D S. — (1) ELIGIBILITY TO ELECT; BONDS WITH RESPECT TO WHICH ELECTION PERMITTED.—This section shall apply with respect to the
following classes of taxpayers with respect to the following classes of bonds only if the taxpayer has elected to have this section apply: (A) PARTIALLY TAX-EXEMPT.—In the case of a taxpayer other than a corporation, bonds with respect to the interest on which the credit provided in section 35 is allowable; and (B) WHOLLY TAXABLE,—In the case of any taxpayer, bonds the interest on which is not excludable from gross income b u t with respect to which the credit provided in section 35, or the deduction provided in section 242, is not allowable. (2) M A N N E R AND EFFECT OF ELECTION.—The election authorized under this subsection shall be made in accordance with such regulations as the Secretary or his delegate shall prescribe. If such election is made with respect to any bond (described in paragraph (1)) of the taxpayer, it shall also apply to all such bonds held by the taxpayer a t the beginning of the first taxable year to which the election applies and to all such bonds thereafter acquired by him and shall be binding for all subsequent taxable years with respect to all such bonds of the taxpayer, unless, on application by the taxpayer, the Secretary or his delegate permits him, subject to such conditions as the Secretary or his delegate deems necessary, to revoke such election. I n the case of bonds held by a common trust fund, as defined in section 584(a), or by a foreign personal holding company, as defined in section 552, the election authorized under this subsection shall be exercisable with respect to such bonds only by the common trust fund or foreign personal holding company. I n case of bonds held by an estate or trust, the election authorized under this subsection shall be exercisable with respect to such bonds only by the fiduciary. (d) B O N D D E F I N E D. — For purposes of this section, the term "bond" means any bond, debenture, note, or certificate or other evidence of indebtedness, issued by any corporation and bearing interest (including any like obligation issued by a government or political subdivision thereof), but does not include any such obligation which constitutes stock in trade of the taxpayer or any such obligation of a kind which would properly be included in the inventory of the taxpayer if on hand a t the close of the taxable year, or any such § 171(b)(2)
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